================================================================================

                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q




               QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended March 31, 1997       Commission file number 1-27


                                   TEXACO INC.
           (Exact name of the registrant as specified in its charter)


       Delaware                                                 74-1383447
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               Identification No.)


      2000 Westchester Avenue
      White Plains, New York                                       10650
(Address of principal executive offices)                         (Zip Code)



        Registrant's telephone number, including area code (914) 253-4000




     Texaco Inc. (1) HAS FILED all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and
(2) HAS BEEN subject to such filing requirements for the past 90 days.

     As of April 30, 1997, there were outstanding  263,634,553  shares of Texaco
Inc. Common Stock - par value $6.25.

================================================================================

<PAGE>

<TABLE>
<CAPTION>
                         PART I - FINANCIAL INFORMATION

                      TEXACO INC. AND SUBSIDIARY COMPANIES
                        STATEMENT OF CONSOLIDATED INCOME
               FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
               --------------------------------------------------
                 (Millions of dollars, except per share amounts)

                                                                                        (Unaudited)
                                                                                   ----------------------
                                                                                   For the three months
                                                                                      ended March 31,
                                                                                   ----------------------
                                                                                   1997              1996
                                                                                   ----              ----
<S>                                                                              <C>               <C>    
         REVENUES
              Sales and services                                                 $11,813           $10,059
              Equity in income of affiliates,
                  interest,  asset sales and other                                   216               212
                                                                                 -------           -------
                                                                                  12,029            10,271
                                                                                 -------           -------
         DEDUCTIONS
              Purchases and other costs                                            9,298             7,782
              Operating expenses                                                     716               684
              Selling, general and administrative expenses                           397               400
              Maintenance and repairs                                                 87                88
              Exploratory expenses                                                    99                69
              Depreciation, depletion and amortization                               385               350
              Interest expense                                                       101               113
              Taxes other than income taxes                                          139               105
              Minority interest                                                       21                16
                                                                                 -------           -------
                                                                                  11,243             9,607
                                                                                 -------           -------

         Income before income taxes                                                  786               664

         Provision for (benefit from) income taxes                                  (194)              278
                                                                                 -------           -------

         NET INCOME                                                              $   980           $   386
                                                                                 =======           =======

         Preferred stock dividend requirements                                   $    14           $    15
                                                                                 -------           -------

         Net income available for common stock                                   $   966           $   371
                                                                                 =======           =======

         Per common share (dollars)
              Net income                                                         $  3.72           $  1.42

              Cash dividends paid                                                $   .85           $   .80

         Average number of common shares outstanding
              for computation of earnings per share (thousands)                  260,071           260,654

<FN>
                    See   accompanying   notes  to  consolidated  financial statements.
</FN>
</TABLE>


                                      - 1 -
<PAGE>

<TABLE>
<CAPTION>
                                            TEXACO INC. AND SUBSIDIARY COMPANIES
                                                 CONSOLIDATED BALANCE SHEET
                                         AS OF MARCH 31, 1997 AND DECEMBER 31, 1996
                                         ------------------------------------------
                                                   (Millions of dollars)
                                                                                         March 31,               December 31,
                                                                                           1997                     1996
                                                                                        ----------               ------------
                                                                                        (Unaudited)
                                                                                        -----------
<S>                                                                                          <C>                    <C>    
ASSETS
   Current Assets
      Cash and cash equivalents                                                              $   619                $   511
      Short-term investments - at fair value                                                      18                     41
      Accounts and notes receivable, less allowance for doubtful
           accounts of  $34 million in 1997 and 1996                                           4,674                  5,195
      Inventories                                                                              1,677                  1,460
      Deferred income taxes and other current assets                                             373                    458
                                                                                             -------                -------
           Total current assets                                                                7,361                  7,665

   Investments and Advances                                                                    5,301                  4,996

   Properties, Plant and Equipment - at cost                                                  34,166                 33,988
   Less - accumulated depreciation, depletion and amortization                                20,764                 20,577
                                                                                             -------                -------
      Net properties, plant and equipment                                                     13,402                 13,411

   Deferred Charges                                                                              944                    891
                                                                                             -------                -------
           Total                                                                             $27,008                $26,963
                                                                                             =======                =======

LIABILITIES AND STOCKHOLDERS' EQUITY
   Current Liabilities
      Short-term debt                                                                        $   466                $   465
      Accounts payable and accrued liabilities
           Trade liabilities                                                                   2,936                  3,472
           Accrued liabilities                                                                 1,167                  1,333
      Estimated income and other taxes                                                         1,173                    914
                                                                                             -------                -------
           Total current liabilities                                                           5,742                  6,184

   Long-Term Debt and Capital Lease Obligations                                                5,029                  5,125
   Deferred Income Taxes                                                                         769                    795
   Employee Retirement Benefits                                                                1,225                  1,236
   Deferred Credits and Other Noncurrent Liabilities                                           2,512                  2,593
   Minority Interest in Subsidiary Companies                                                     669                    658
                                                                                             -------                -------
           Total                                                                              15,946                 16,591
   Stockholders' Equity
      Market Auction Preferred Shares                                                            300                    300
      ESOP Convertible Preferred Stock                                                           471                    474
      Unearned employee compensation and benefit plan trust                                     (377)                 (378)
      Common stock (authorized: 350,000,000 shares, $6.25 par
           value; 274,293,417 shares issued)                                                   1,714                  1,714
      Paid-in capital in excess of par value                                                     630                    630
      Retained earnings                                                                        9,048                  8,292
      Currency translation adjustment                                                            (95)                  (65)
      Unrealized net gain on investments                                                          22                     33
                                                                                             -------                -------
                                                                                              11,713                 11,000
      Less - Common stock held in treasury, at cost                                              651                    628
                                                                                             -------                -------
         Total stockholders' equity                                                           11,062                 10,372
                                                                                             -------                -------
           Total                                                                             $27,008                $26,963
                                                                                             =======                =======


<FN>
                                 See  accompanying  notes to consolidated  financial statements.
</FN>
</TABLE>

                                       -2-

<PAGE>

<TABLE>
<CAPTION>
                                            TEXACO INC. AND SUBSIDIARY COMPANIES
                                       CONDENSED STATEMENT OF CONSOLIDATED CASH FLOWS
                                     FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
                                     --------------------------------------------------
                                                    (Millions of dollars)
                                                                                                     (Unaudited)
                                                                                              ------------------------
                                                                                                For the three months
                                                                                                   ended March 31,
                                                                                              ------------------------
                                                                                              1997               1996
                                                                                              ----               ----
<S>                                                                                          <C>                 <C>  
OPERATING ACTIVITIES
   Net income                                                                                $  980              $ 386
   Reconciliation to net cash provided by (used in)
      operating activities
         Receivable for refund of IRS deposits                                                 (700)                 -
         Depreciation, depletion and amortization                                               385                350
         Deferred income taxes                                                                  100                 20
         Exploratory expenses                                                                    99                 69
         Minority interest in net income                                                         21                 16
         Dividends from affiliates, less than equity
            in income                                                                           (40)               (59)
         Gains on asset sales                                                                   (19)               (29)
         Changes in operating working capital                                                   257                196
         Other - net                                                                            (49)               (61)
                                                                                              -----              -----
            Net cash provided by operating activities                                         1,034                888

INVESTING ACTIVITIES
   Capital and exploratory expenditures                                                        (678)              (613)
   Proceeds from sale of discontinued operations                                                  -                344
   Proceeds from sales of assets                                                                140                 78
   Sale of leasehold interests                                                                    -                 69
   Purchases of investment instruments                                                         (349)              (507)
   Sales/maturities of investment instruments                                                   389                554
   Other - net                                                                                  (57)                (4)
                                                                                              -----              -----
            Net cash used in investing activities                                              (555)               (79)
FINANCING ACTIVITIES
   Borrowings having original terms in excess
      of three months
         Proceeds                                                                               150                 58
         Repayments                                                                             (75)               (53)
   Net decrease in other borrowings                                                            (174)              (599)
   Purchases of common stock                                                                    (31)               (22)
   Dividends paid to the company's stockholders
      Common                                                                                   (221)              (208)
      Preferred                                                                                  (4)                (5)
   Dividends paid to minority shareholders                                                      (10)               (10)
                                                                                              -----              -----
            Net cash used in financing activities                                              (365)              (839)

CASH AND CASH EQUIVALENTS
   Effect of exchange rate changes                                                               (6)                (3)
                                                                                              -----              -----
   Increase (decrease) during period                                                            108                (33)
   Beginning of year                                                                            511                501
                                                                                              -----              -----
   End of period                                                                              $ 619              $ 468

<FN>
                         See  accompanying   notes  to  consolidated financial statements.
</FN>
</TABLE>

                                       -3-
<PAGE>

                      TEXACO INC. AND SUBSIDIARY COMPANIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------

Note 1. Discontinued Operations
-------------------------------

On February  29,  1996,  Texaco  completed  the  disposition  of its  operations
classified as  discontinued  operations by completing  the sale of its worldwide
lubricant additives business to Ethyl Corporation for $136 million in cash and a
three-year note with a face amount of $60 million.

Revenues for the discontinued  operations  totaled $33 million for the first two
months of 1996, representing activities through the sale date.

Discontinued operations had no significant impact on first quarter 1996 results.


Note 2. Inventories
-------------------

The  inventories of Texaco Inc. and  consolidated  subsidiary  companies were as
follows:

<TABLE>
<CAPTION>
                                                                                                 As of
                                                                                --------------------------------------
                                                                                 March 31,                December 31,
                                                                                   1997                       1996
                                                                                   ----                       ----
                                                                                (Unaudited)
                                                                                         (Millions of dollars)

<S>                                                                               <C>                       <C>   
     Crude oil                                                                    $  499                    $  296

     Petroleum products and petrochemicals                                           910                       904

     Other merchandise                                                                51                        58

     Materials and supplies                                                          217                       202
                                                                                  ------                    ------
          Total                                                                   $1,677                    $1,460
                                                                                  ======                    ======
</TABLE>


Note 3. Contingent Liabilities
------------------------------

Information  relative to commitments  and contingent  liabilities of Texaco Inc.
and  subsidiary  companies  is presented in Notes 14 and 16, pages 63-64 and 67,
respectively, of Texaco Inc.'s 1996 Annual Report to Stockholders.  With respect
to the Internal  Revenue Service (IRS) claims  discussed in Note 16, page 67, of
Texaco  Inc.'s 1996 Annual  Report to  Stockholders,  on April 21, 1997 the U.S.
Supreme Court  decided not to review the decisions of the U.S.  Court of Appeals
for the Fifth Circuit and the U.S. Tax Court in the so-called "Aramco Advantage"
case.

As a  result  of this  decision  by the  Supreme  Court,  Texaco  recognized  an
after-tax   earnings  benefit  of  $488  million  in  the  first  quarter  1997,
representing  the expected  refund of the balance of deposits made to the IRS in
previous  years for  potential  tax claims and accrued  interest.  The  expected
refund,  including interest,  exceeds $700 million. A significant portion of the
refund is expected to be received in 1997.




                                   ----------



                                      - 4 -

<PAGE>

In the company's opinion, while it is impossible to ascertain the ultimate legal
and financial liability with respect to contingent  liabilities and commitments,
including lawsuits,  claims,  guarantees,  taxes and regulations,  the aggregate
amount of such liability in excess of financial  reserves is not  anticipated to
be materially  important in relation to the consolidated  financial  position or
results of operations of Texaco Inc. and its subsidiaries.





Note 4. Caltex Group of Companies
---------------------------------

Summarized  unaudited  financial  information for the Caltex Group of Companies,
owned 50% by Texaco and 50% by Chevron  Corporation,  is presented  below and is
reflected on a 100% Caltex Group basis:

<TABLE>
<CAPTION>
                                                                              For the three months
                                                                                 ended March 31,
                                                                              --------------------
                                                                              1997            1996
                                                                              ----            ----
                                                                              (Millions of dollars)

<S>                                                                          <C>             <C>   
                  Gross revenues                                             $4,694          $4,161

                  Income before income taxes                                 $  320          $  314

                  Net income                                                 $  186          $  195
</TABLE>


On April 2, 1996, Caltex Petroleum Corporation  ("Caltex") completed the sale of
its 50% interest in Nippon Petroleum  Refining  Company,  Limited to its partner
Nippon Oil Company  for  approximately  $2  billion.  Caltex' net income for the
second  quarter of 1996  included a gain of $621  million  associated  with this
sale.

Effective  April 1, 1997,  Caltex' 40%  interest in its Bahrain  refining  joint
venture  (Bapco)  was  sold  to  the  Government  of the  State  of  Bahrain  at
approximately net book value.







                              * * * * * * * * * * *







In the determination of preliminary and unaudited  financial  statements for the
three-month  periods ended March 31, 1997 and 1996, Texaco's accounting policies
have been applied on a basis consistent with the application of such policies in
Texaco's financial  statements issued in its 1996 Annual Report to Stockholders.
In the opinion of Texaco,  all adjustments and disclosures  necessary to present
fairly  the  results  of  operations  for such  periods  have been  made.  These
adjustments include normal recurring adjustments.  The information is subject to
year-end audit by independent public  accountants.  Texaco makes no forecasts or
representations with respect to the level of net income for the year 1997.




                                      - 5 -
<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                  ---------------------------------------------



RESULTS OF OPERATIONS
---------------------

Total net income for the first  quarter of 1997 was $980  million,  or $3.72 per
share,  including a $488 million  benefit  associated with the resolution of the
"Aramco  Advantage"  case.  Net  income  for the first  quarter of 1996 was $386
million,  or $1.42 per share.  Net income for the first  quarter of 1997  before
special items was $492 million, or $1.84 per share.

In the first quarter of 1997:
         o    Net  income   before   special   items   increased  27  percent  -
              representing the 11th consecutive quarter that net income exceeded
              previous years' levels.
         o    Worldwide daily production rose 4 percent.
         o    Capital  and  exploratory  expenditures  grew  25  percent to $799
              million.
         o    Total debt to  total borrowed and invested capital was 32 percent,
              at the low end of our target range.
         o    Expenses continue to be managed at levels less than inflation.

The company's upstream business had another strong quarter,  as higher commodity
prices were enhanced by increased daily crude oil and natural gas production. In
the downstream  business,  earnings continued to grow in the company's expanding
Latin American  marketing  operations  and margins in Europe  improved over last
year's depressed  levels.  However,  earnings in the Caltex operating areas were
lower, and U.S. downstream results were level with last year.

During  the  first  quarter,  the  company  increased  capital  and  exploratory
spending,  focusing on upstream growth  opportunities  in the U.S., as appraisal
and  development  work  continued in the Gulf of Mexico.  After some  unexpected
operating  delays,  first oil flowed from the U.K.  North Sea  Captain  field in
March and  production  is  increasing  rapidly.  Also,  government  approval was
secured for developing the U.K. Galley field, and the company  announced natural
gas discoveries in Australia and Thailand.

The  company  moved  forward  in  March  with the  signing  of a  memorandum  of
understanding  with  Shell Oil  Company to combine  major  elements  of its U.S.
downstream  operations,  and the  company  completed  the sale of its  remaining
chemical business.

On April 21, 1997,  Texaco was notified  that the United  States  Supreme  Court
decided not to review the  favorable  decisions  of the United  States  Court of
Appeals  for the Fifth  Circuit  and the United  States Tax Court in the "Aramco
Advantage"  case.  This  decision  by  the  Supreme  Court,  affirming  Texaco's
position,  resulted in an earnings benefit of $488 million,  or $1.88 per share.
This benefit represents the after-tax effect of the expected refund of payments,
with associated interest, made to the Internal Revenue Service in previous years
for potential  tax claims.  The total refund from the IRS,  including  interest,
will exceed $700 million. A significant portion of this amount is expected to be
received in 1997.



                                      - 6 -
<PAGE>

                               OPERATING EARNINGS

PETROLEUM AND NATURAL GAS
     EXPLORATION AND PRODUCTION
        United States

First quarter 1997  earnings  were $311 million,  compared with $267 million for
the first quarter of 1996. The 16-percent earnings improvement was due to higher
prices and  continuing  success in enhancing  production  from existing  fields,
particularly in the Gulf of Mexico and Louisiana.

Texaco's average realized crude oil price for the first quarter 1997 was $19.62,
an increase of $3.11  per barrel over 1996. The average  realized natural gas
price for the  first  quarter of 1997 was $2.66 per thousand cubic feet  (MCF),
an increase of $.51 per MCF over 1996. A price  spike  late in  1996,  
attributed  to lean  stock  levels  at a time of seasonally  strong  demand,  
extended  into January  1997.  Prices  retreated in February and March,  due to
abnormally  mild weather and  increasing  worldwide supplies.

Partially  offsetting the favorable  factors were lower gas trading  results and
higher  exploratory  expenses.  Exploratory  expenses  before taxes in the first
quarter  of 1997 were $42  million  versus $23  million in the first  quarter of
1996.  This sharp  increase is  attributed  to higher  seismic  and  exploratory
drilling activity of promising prospects, mostly in the Gulf of Mexico.

         International

First quarter 1997 earnings were $156 million, as compared with $130 million for
the first quarter of 1996. The 20-percent  improvement in earnings  included the
effects of higher  crude oil prices,  up 8 percent,  and  increased  liquids and
natural gas production.

Total daily production  increased 9 percent as a result of new production in the
Wafra field in the Partitioned  Neutral Zone between Saudi Arabia and Kuwait, in
the Bagre field  offshore  Angola,  and in the Danish North Sea coming  onstream
late  in  1996.  Additionally,  natural  gas  production  benefited  from a full
quarter's  operations  at  the  Dolphin  field  in  Trinidad.  These  production
increases, as well as continued field development programs, more than offset the
impact of maturing fields.  Higher exploratory expenses associated with Texaco's
aggressive  exploration  program,  as well as lower gas  trading  results in the
U.K., partially offset these favorable results.

Operating  results  for the first  quarter  1997  included a  non-cash  currency
benefit of $19 million due to the  weakening  of the Pound  Sterling  versus the
U.S.  dollar  relating to deferred  income taxes,  compared with a benefit of $4
million for the first quarter 1996.

     MANUFACTURING, MARKETING AND DISTRIBUTION
         United States

First quarter 1997  earnings  were $6 million,  compared with $4 million for the
first quarter of 1996.  Earnings in 1997 reflected improved refining results due
to increased  throughput and higher wholesale  product prices.  This improvement
was somewhat reduced by the impact of refinery fires late in 1996 and early 1997
that resulted in property  damage and adversely  affected  product yields in the
first quarter.  The refining system returned to normal  operations by the middle
of March.

Improved  refining  earnings were largely  offset by lower West Coast  marketing
margins  due  to  intense  competition  in  the  marketplace.   Results  in  the
distribution and transportation  business and chemicals were also lower than the
first quarter of 1996.




                                      - 7 -
<PAGE>

         International

First quarter 1997  earnings were $104 million,  compared to $92 million for the
first quarter of 1996.  The earnings  were driven by improved  results in Europe
and Latin  America.  Caltex'  results were below the first quarter of last year,
but reflect a significant improvement over the latter half of 1996.

Higher  refining  earnings in Europe and Latin  America in the first  quarter of
1997 were primarily due to the improved  recovery of crude costs in the U.K. and
Panama.  Marketing  margins in Latin  America also improved in the first quarter
1997 versus the same quarter in 1996 due to higher prices.

Caltex' improved operating margins in Korea were more than offset by unfavorable
refining margins in Thailand, and higher currency losses of $26 million,  mostly
from the significant weakening of the Korean Won.

Refined  product  sales  decreased  due to Caltex'  April 1,  1996,  sale of its
interest in refining operations in Japan and reduced  purchase/sale  activity to
balance the system.

Operating  results  for the first  quarter  1997  included a  non-cash  currency
benefit of $5 million due to the weakening of the Pound Sterling versus the U.S.
dollar relating to deferred income taxes,  compared with a benefit of $4 million
for the first quarter of 1996.

NONPETROLEUM

Nonpetroleum  earnings for the first quarter of 1997 were $12 million,  compared
with $2 million in the first quarter of 1996.


                             CORPORATE/NONOPERATING

Corporate  and  nonoperating  earnings  for the first  quarter of 1997 were $391
million as compared  with charges of $109 million for the first quarter of 1996.
Corporate and nonoperating results for the first quarter of 1997 included a $488
million benefit  associated with the resolution of the "Aramco  Advantage" case.
Excluding this benefit, the comparative improvement of $12 million was primarily
attributable to reduced  interest  expense due to lower debt levels and slightly
lower interest rates.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

Texaco's cash, cash equivalents and short-term  investments totaled $637 million
at March 31, 1997, as compared with $552 million at year-end 1996. Cash provided
by operating  activities of $1.0 billion for the first quarter of 1997 supported
outlays of $678 million for the company's  capital and  exploration  program and
$235   million  in  dividend   payments  to  common,   preferred   and  minority
shareholders.

At March 31, 1997,  Texaco's  ratio of total debt to total borrowed and invested
capital was 31.9%,  as compared with 33.6% at year-end  1996.  This  improvement
reflected  strong  operating  results,  the favorable  resolution of the "Aramco
Advantage"  case and a reduction  in debt to $5.5  billion  from $5.6 billion at
year-end 1996. At March 31, 1997,  Texaco's long-term debt included $922 million
of debt  scheduled  to mature  within one year,  which the  company has both the
intent and the ability to refinance on a long-term basis. The company maintained
a revolving credit facility with  commitments of $1.5 billion,  which was unused
at both March 31, 1997 and at year-end 1996.

During the first  quarter of 1997,  the  company  issued  $150  million of 7.09%
noncallable Notes due 2007. Proceeds from this offering will be used for working
capital, retirement of existing debt and other general corporate purposes.

As of March 31,  1997,  $194  million has been  expended  under the $500 million
common stock  repurchase  program  announced  in 1995,  of which $31 million was
expended   during  the  first  quarter  of  1997.   The  company  will  continue
repurchasing shares from time to time based on market conditions.


                                      - 8 -
<PAGE>


On March 21, 1997,  Texaco exercised an option to terminate a lease  arrangement
and obtained ownership of the assets used in its propylene oxide/methyl tertiary
butyl ether (PO/MTBE)  business.  Concurrent with this transaction,  Texaco sold
the PO/MTBE business to a Huntsman Corporation  affiliate for cash and preferred
stock. The cash proceeds of $512 million were used to  substantially  offset the
cost of exercising the option.  The preferred stock,  with a stated value of $65
million, is mandatorily redeemable in eleven years.

On April 21, 1997,  the United  States  Supreme  Court decided not to review the
decisions  of the U.S.  Court of Appeals for the Fifth  Circuit and the U.S. Tax
Court in the so-called "Aramco  Advantage" case. In previous years,  Texaco made
payments,  with associated  interest,  to the IRS for potential tax claims. As a
result of the Supreme  Court action,  Texaco  expects a refund in excess of $700
million,  which  represents the remaining  balance of these deposits and accrued
interest.  A  significant  portion of the refund is  expected  to be received in
1997.

During April 1997, the company  finalized the sale of a 15% interest in its U.K.
North  Sea  Captain  Field  to  an  affiliate  of  Korea  Petroleum  Development
Corporation for approximately $210 million.  Of this total amount,  installments
of $20 million and $25 million were  received  during the first  quarter of 1996
and 1997,  respectively.  Also during April 1997, the company sold its interests
in certain producing operations in Canada for approximately $80 million.

On May 1, 1997,  the company  completed  the  previously  announced  sale of its
credit card services unit,  including its portfolio of  proprietary  credit card
accounts  receivable,  to  Associates  First  Capital  Corporation,  an indirect
majority-owned  subsidiary of the Ford Motor Company.  As a result of this sale,
Texaco received cash proceeds of approximately  $300 million for its proprietary
credit card accounts receivables and associated processing assets.

During  the  second  quarter  of 1997,  Texaco  expects  to  repurchase  certain
equipment leasehold  interests in conjunction with a sale/leaseback  arrangement
for somewhat less than the proceeds received. Through March 31, 1997, Texaco has
received $509 million for those leasehold interests.

The company considers its financial position  sufficient to meet its anticipated
future financial requirements.

EMPLOYEE SEVERANCE PROGRAM
--------------------------

On October 30, 1996,  Texaco  announced a  companywide  realignment  designed to
enhance  the  company's  ability  to  grow  existing  and new  businesses.  This
realignment,   coupled  with  other  organizational  enhancements  such  as  the
consolidation  of  operations,  is  designed  to  stimulate  growth and  improve
efficiencies in both support and operating  functions.  However,  it is expected
that some overlapping  activities will be eliminated  resulting in the reduction
of some 750 employees  worldwide by the end of 1997.  An after-tax  provision of
$56  million was  recorded  in the fourth  quarter of 1996 to cover the costs of
employee separations, including employees of affiliates. Through March 31, 1997,
approximately  350 employees have been terminated  with a related  commitment to
severance payments of $15 million after-tax. Of this commitment, payments of $10
million have been made and charged against the reserve as of March 31, 1997.

NEW ACCOUNTING STANDARD
-----------------------

In February 1997,  the Financial  Accounting  Standards  Board issued  Statement
of Financial  Accounting  Standards (SFAS) 128, Earnings per Share. Under SFAS
128, companies  currently  required to report primary and fully diluted  
earnings per share (EPS), will instead report basic and diluted EPS, 
respectively. Currently, primary EPS considers the average  number of common 
shares  outstanding  and the potential  dilution  that would  result if  
conversion  rights  associated  with certain outstanding  securities were 
exercised.  Fully diluted EPS considers all potentially dilutive securities. 
Basic EPS, which will replace primary EPS, does not consider any potential 
dilution. Diluted EPS is essentially similar to fully diluted EPS.

Texaco must adopt SFAS 128 for its fiscal year 1997 financial statements and, at
that  time,  restate  the per share  amounts  of prior  periods.  Amounts  to be
reported as basic and diluted EPS in accordance  with the new Statement will not
differ significantly from previously reported primary and fully diluted EPS.

                                      - 9 -
<PAGE>


CAPITAL AND EXPLORATORY EXPENDITURES
------------------------------------

Capital and exploratory  expenditures,  including equity in such expenditures of
affiliates,  were $799  million for the first  quarter of 1997 as compared  with
$641 million for the same period of 1996.

In the U.S.,  Texaco's  aggressive 1997  exploration  and  development  drilling
program is focused on strategic  opportunities  onshore and  offshore.  Offshore
development  continued  in the  deepwater  Gulf of Mexico  where  Texaco holds a
strong lease-acreage position. Platform construction and development drilling is
underway in the Petronius and Arnold fields while delineation drilling continues
in the Fuji and Gemini prospects.  Texaco also continues an aggressive  drilling
and  development  program  in  traditional  offshore  shelf  areas and  onshore.
Expenditures  in 1997  reflect  enhanced oil recovery  projects  using  advanced
thermal and CO2 techniques to increase production and lower per-barrel operating
expenses.  Thermal steam-flooding has been particularly successful at Kern River
in Bakersfield, California.

Internationally,  higher expenditures reflect development work in the U.K. North
Sea,  including  the  Erskine and Galley  fields and  drilling  and  development
expenditures  for the Mariner  project.  Development  work was  completed in the
Captain   field  which  came  onstream  late  in  the  first  quarter  of  1997.
Additionally,  exploration  and  development  work continued in Nigeria,  China,
Indonesia, and the Partitioned Neutral Zone.

Downstream expenditures in the U.S. declined somewhat, reflecting the completion
of refinery upgrades.  Internationally,  expenditures increased due to marketing
expenditures  in  the  Pacific  Rim  by  Texaco's  affiliate,  Caltex  Petroleum
Corporation.



                           PART II - OTHER INFORMATION



Item 1. Legal Proceedings
-------------------------



Reference is made to the  discussion of Contingent  Liabilities in Note 3 to the
Consolidated  Financial  Statements  of this  Form  10-Q and to Item 3 of Texaco
Inc.'s  1996  Annual  Report  on Form  10-K,  which are  incorporated  herein by
reference.
                                     - 10 -
<PAGE>



Item 5. Other Information
-------------------------
<TABLE>
<CAPTION>
                                                                                                     (Unaudited)
                                                                                              -----------------------
                                                                                                For the three months
                                                                                                   ended March 31,
                                                                                              -----------------------
                                                                                              1997               1996
                                                                                              ----               ----
                                                                                                (Millions of dollars)

<S>                                                                                            <C>                <C> 
FUNCTIONAL NET INCOME
---------------------
Operating earnings
   Petroleum and natural gas
      Exploration and production
         United States                                                                         $311              $ 267
         International                                                                          156                130
                                                                                               ----               ----
           Total                                                                                467                397
                                                                                               ----               ----
      Manufacturing, marketing and distribution
         United States                                                                            6                  4
         International                                                                          104                 92
                                                                                               ----               ----
           Total                                                                                110                 96
                                                                                               ----               ----

           Total petroleum and natural gas                                                      577                493

   Nonpetroleum                                                                                  12                  2
                                                                                               ----               ----
           Total operating earnings                                                             589                495

Corporate/Nonoperating                                                                          391               (109)
                                                                                               ----               ----
Total net income                                                                               $980               $386
                                                                                               ====               ====


CAPITAL AND EXPLORATORY EXPENDITURES - INCLUDING
------------------------------------------------
      EQUITY IN AFFILIATES
      --------------------
Exploration and production
         United States                                                                         $352               $266
         International                                                                          282                207
                                                                                               ----               ----
           Total                                                                                634                473
                                                                                               ----               ----
Manufacturing, marketing and distribution
         United States                                                                           60                 77
         International                                                                          101                 87
                                                                                               ----               ----
           Total                                                                                161                164
                                                                                               ----               ----
Other                                                                                             4                  4
                                                                                               ----               ----
           Total, including equity in affiliates                                               $799               $641
                                                                                               ====               ====
</TABLE>


                                     - 11 -
<PAGE>

<TABLE>
<CAPTION>
                                                                                                           (Unaudited)
                                                                                                      --------------------
                                                                                                      For the three months
                                                                                                         ended March 31,
                                                                                                      --------------------
                                                                                                      1997            1996
                                                                                                      ----            ----

<S>                                                                                                  <C>            <C>   
OPERATING DATA - INCLUDING INTERESTS
------------------------------------
     IN AFFILIATES
     -------------

Exploration and Production
--------------------------

United States
-------------
     Net production of crude oil and natural
         gas liquids (000 BPD)                                                                          384            382
     Net production of natural gas - available
         for sale (000 MCFPD)                                                                         1,656          1,648
     Total net production (000 BOEPD)                                                                   660            657

     Natural  gas sales (000 MCFPD)                                                                   3,841          3,235
     Natural gas liquids sales - (including
         purchased LPGs) (000 BPD)                                                                      203            245

     Average U.S. crude (per bbl)                                                                    $19.62         $16.51
     Average U.S. natural gas (per mcf)                                                              $ 2.66         $ 2.15
     Average WTI (Spot) (per bbl)                                                                    $22.76         $19.75
     Average Kern (Spot) (per bbl)                                                                   $15.98         $14.90

International
-------------
     Net production of crude oil and natural
         gas liquids (000 BPD)
         Europe                                                                                         114            119
         Indonesia                                                                                      140            137
         Partitioned Neutral Zone                                                                        90             72
         Other                                                                                           69             62
                                                                                                     ------         ------
              Total                                                                                     413            390
     Net production of natural gas - available
         for sale (000 MCFPD)
              Europe                                                                                    241            205
         Colombia                                                                                       132            115
         Other                                                                                          102             53
                                                                                                     ------         ------
              Total                                                                                     475            373

     Total net production (000 BOEPD)                                                                   492            452

     Natural gas sales (000 MCFPD)                                                                      620            475
     Natural gas liquids sales - (including
         purchased LPGs) (000 BPD)                                                                       83            116

     Average International crude (per bbl)                                                           $19.48         $18.02
     Average U.K. natural gas (per mcf)                                                              $ 2.85         $ 2.63
     Average Colombia natural gas (per mcf)                                                          $ 1.05         $  .94

</TABLE>


                                     - 12 -

<PAGE>

<TABLE>
<CAPTION>
                                                                                                           (Unaudited)
                                                                                                      --------------------
                                                                                                      For the three months
                                                                                                         ended March 31,
                                                                                                      --------------------
                                                                                                      1997            1996
                                                                                                      ----            ----
OPERATING DATA - INCLUDING INTERESTS
------------------------------------
     IN AFFILIATES
     -------------

<S>                                                                                                   <C>            <C>  
Manufacturing, Marketing and Distribution
-----------------------------------------
United States
-------------
     Refinery input (000 BPD)
         Subsidiary                                                                                     409            395
         Affiliate - Star Enterprise                                                                    336            316
                                                                                                      -----          -----
              Total                                                                                     745            711

     Refined product sales (000 BPD)
         Gasolines                                                                                      497            476
         Avjets                                                                                          89            131
         Middle Distillates                                                                             214            219
         Residuals                                                                                       85             61
         Other                                                                                          121            134
                                                                                                      -----          -----
              Total                                                                                   1,006          1,021

International
-------------
     Refinery input (000 BPD)
         Europe                                                                                             348            334
         Affiliate - Caltex                                                                                 407            499
         Latin America/West Africa                                                                           62             59
                                                                                                      -----          -----
              Total                                                                                          817            892

     Refined product sales (000 BPD)
         Europe                                                                                             467            475
         Affiliate - Caltex                                                                                 586            712
         Latin America/West Africa                                                                          366            389
         Other                                                                                               43             71
                                                                                                      -----          -----
             Total                                                                                            1,462          1,647
 
</TABLE>


                                     - 13 -
<PAGE>

Item 6. Exhibits and Reports on Form 8-K
----------------------------------------

(a)  Exhibits

     --    (11) Computation of Earnings Per Share of Common Stock of Texaco Inc.
                and Subsidiary Companies.

     --    (12) Computation of Ratio of Earnings to Fixed Charges of Texaco on a
                Total Enterprise Basis.

     --    (20) Copy of  Texaco Inc.'s Annual Report on Form 10-K for the fiscal
                year ended December  31,  1996  (including  portions  of  Texaco
                Inc.'s  Annual  Report to  Stockholders  for the year  1996), as
                previously filed  by the  Registrant  with  the  Securities  and
                Exchange Commission, File No. 1-27.

     --    (27) Financial Data Schedule.


(b)  Reports on Form 8-K:

     During the first quarter of 1997, the Registrant filed a Current  Report on

     Form 8-K for the following events:

     1.   January 7, 1997 (date of earliest event reported: December 24, 1996)

          Item 5. Other  Events -- reported  that Texaco  announced  that it had
          reached an agreement to sell its propylene oxide/methyl tertiary butyl
          ether (PO/MTBE) business to Huntsman  Corporation.  Texaco appended as
          an exhibit thereto a copy of the Press Release  entitled "Texaco Sells
          PO/MTBE Business to Huntsman Corporation," dated December 24, 1996.

     2.   January 23, 1997 (date of earliest event reported: January 23, 1997)

          Item 5. Other Events -- reported that Texaco issued an Earnings  Press
          Release for the fourth  quarter and year 1996.  Texaco  appended as an
          exhibit thereto a copy of the Press Release  entitled  "Texaco Reports
          Results for the Fourth Quarter and Year 1996," dated January 23, 1997.

     3.   January 29, 1997 (date of earliest event reported: January 27, 1997)

          Item 5.  Other  Events  --  provided  a  description  of an  Officer's
          Certificate  executed by Texaco  Capital Inc.  which  established  the
          terms and provisions of a $150 million series of securities designated
          "7.09%  Guaranteed  Notes Due  2007."  Texaco  appended  as an exhibit
          thereto a copy of the Press Release entitled "Texaco  Announces Public
          Issuance of $150 Million in 10-Year Debt  Securities,"  dated  January
          27, 1997.

     4.   March 19, 1997 (date of earliest event reported: March 18, 1997)

          Item 5. Other  Events -- reported  that Texaco  announced  that it and
          Shell Oil Company signed a memorandum of  understanding to combine the
          major  elements of their  midwestern  and western  U.S.  refining  and
          marketing activities and their total U.S. transportation,  trading and
          lubricants  businesses  and that the two companies and Saudi  Refining
          Inc. (SRI),  have made  significant  progress in discussions  toward a
          separate  memorandum of  understanding  to combine Star  Enterprise (a
          50/50 joint  venture  between SRI and Texaco in the eastern  U.S) with
          Shell's eastern U.S. refining and marketing business.  Texaco appended
          as an exhibit thereto a copy of the Press Release  entitled "Shell And
          Texaco Sign  Memorandum  Of  Understanding  To Combine U.S.  Refining,
          Marketing,  Transportation,  Trading And Lubricants Operations," dated
          March 18, 1997.




                                     - 14 -
<PAGE>

                                   SIGNATURES
                                   ----------



     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.




                                                                 Texaco Inc.
                                                          ----------------------
                                                                (Registrant)




                                                     By:        R.C. Oelkers
                                                          ----------------------
                                                                (Comptroller)




                                                     By:         R.E. Koch
                                                          ----------------------
                                                           (Assistant Secretary)




Date:    May 12, 1997
         ------------














                                     - 15 -